Taxes

[jdobbin]

The Tories have promised another GST cut. When that comes is hard to say.

The surplus continues to be a healthy one although for how long with the present spending and the possibility of a recession is also hard to say.

There have been many tax cut ideas tossed around in the last several months. What are some of the best ways to cut tax so that it is applied fairly and gets the best bang for the buck?

Dion has been talking about taxes the last couple of weeks. Some of his ideas sound good, a few do not. I am not really in favour of bringing back the income trusts. It just brings uncertainty to the market now. As for income splitting, I don't feel it is a tax that can be applied fairly.

http://www.canada.com/nationalpost/financi...ca3&k=56887

MONTREAL - Liberal Leader Stephane Dion laid out yesterday some of the key elements that will make up his party's future economic platform, saying it would include tax cuts aimed at spurring the country's competitiveness as well as an attack on the country's innovation and productivity deficit.

He said his party was successful in tackling the fiscal deficit in the 1990s, and that under his direction it would tackle the productivity gap Canada has with the rest of the world, most notably the United States.

As part of that plan, Mr. Dion said his party would look to cut taxes across the board and remove barriers that penalize expansion.

"We will focus our tax cuts on the competitiveness of the country," Mr. Dion told reporters following a one-day Liberal Party conference focused on economic issues. "I will give the good incentives to create a good economic culture."

It would be interesting to see an election where tax cuts became one of the main issues.

[Pat Coghlan]

Forget tax cuts per se.

What is needed is tax reform along the lines of the income-splitting provision now in place for retirees. There should be tax brackets for various family classes (singles, couples, couples with children etc.). After all, the government looks at your FAMILY income when determining your eligibility for benefits, and IMHO ability to pay taxes and eligibility for benefits are two sides of the same coin.

[jdobbin]

Forget tax cuts per se.

What is needed is tax reform along the lines of the income-splitting provision now in place for retirees. There should be tax brackets for various family classes (singles, couples, couples with children etc.). After all, the government looks at your FAMILY income when determining your eligibility for benefits, and IMHO ability to pay taxes and eligibility for benefits are two sides of the same coin.

I don't disagree with tax reform but it isn't something that is easily articulated in an election. I believe that any tax reform is work for a Parliamentary committee or a special commission.

I think income splitting has the potential of being very expensive and may preclude other tax cuts.

I think that general income tax cuts have the best potential of being applied widely and fairly.

[old_bold&cold]

If I had my choice of how we were taxed, I would raise the GST to 13-14% and drop income tax completely for all people. I would keep a business income tax but at a much lower level etc. That way we would have it much harder for people to cheat and those who do manage to cheat will still have to pay for all the taxes that have been added up to their level of purchase. The underground economy would not make sense any more and so we would have more people paying fair shares.

[fellowtraveller]

How can 'tax cuts' come at the beginning of a process, a la Dion?

How can tax cuts be at the forefront of an election campaign?

Shouldn't a sensible govt detail how it plans to spend, hiow it plans to tax, then tell us how they will ensure that the net result will be as close to zero as they can possibly make it?.

That is good governance or rather good financial management IMO.

[M.Dancer]

If I had my choice of how we were taxed, I would raise the GST to 13-14% and drop income tax completely for all people.

I would make it a hybrid.....say a rebate for low income earners (who be nessesity spend all their money therfore all their money would be taxed) and a sur charge for (lets say) the top 5%.

[jdobbin]

If I had my choice of how we were taxed, I would raise the GST to 13-14% and drop income tax completely for all people. I would keep a business income tax but at a much lower level etc. That way we would have it much harder for people to cheat and those who do manage to cheat will still have to pay for all the taxes that have been added up to their level of purchase. The underground economy would not make sense any more and so we would have more people paying fair shares.

I don't know that the GST would have to go that high if all exemptions on what was taxed were dropped. If food was included, you might be able to keep the GST at 7%.

Still, this is the type of discussion that requires a lot of thought and shouldn't be one made with haste.

[jdobbin]

How can 'tax cuts' come at the beginning of a process, a la Dion?

How can tax cuts be at the forefront of an election campaign?

Shouldn't a sensible govt detail how it plans to spend, hiow it plans to tax, then tell us how they will ensure that the net result will be as close to zero as they can possibly make it?.

That is good governance or rather good financial management IMO.

The Tories put the GST cut at the forefront of the last election. Did you disagree with that?

Dion is not in government at the moment so all he can do is propose how he plans to spend and tax. He isn't privy to the entire details of the present government's budget.

[Pat Coghlan]

I don't disagree with tax reform but it isn't something that is easily articulated in an election. I believe that any tax reform is work for a Parliamentary committee or a special commission.

I think income splitting has the potential of being very expensive and may preclude other tax cuts.

I think that general income tax cuts have the best potential of being applied widely and fairly.

The way they do it in the US is that married couples file a joint return, and the tax brackets for couples are 175% as wide as for singles, i.e. a single person pays the same marginal tax rate at $100K as a married couple does at $175K.

[fellowtraveller]

The Tories put the GST cut at the forefront of the last election. Did you disagree with that?

Dion is not in government at the moment so all he can do is propose how he plans to spend and tax. He isn't privy to the entire details of the present government's budget.

Yes I disagree with that, a specific tax cut should only be proposed in the context of a summary of expenditures and revenues. It's also a bit dumb to dangle another 1% cut to the GST without knowing the balance sheet in the future.

Dion was in government and in Cabinet long enough to know all he needs to know. However, he is Old Guard in a party that will say anything to get elected, a la Chretien and Martin. It's just taxpayers money, who cares what you tell the sheep.

[jdobbin]

The way they do it in the US is that married couples file a joint return, and the tax brackets for couples are 175% as wide as for singles, i.e. a single person pays the same marginal tax rate at $100K as a married couple does at $175K.

I don't know that this is the same thing as what is being proposed by some in Canada.

[jdobbin]

Dion was in government and in Cabinet long enough to know all he needs to know. However, he is Old Guard in a party that will say anything to get elected, a la Chretien and Martin. It's just taxpayers money, who cares what you tell the sheep.

I have no problems of parties making tax or spending announcements in the context of a campaign. I don't think it is an area only reserved for those in government.

All I ask is that such promises are costed out to the best of the party's abilities.

[Pat Coghlan]

I don't know that this is the same thing as what is being proposed by some in Canada.

I'm not aware of any initiative to extend the income-splitting provision recently given to senior to all families.

[Michael Bluth]

I'm not aware of any initiative to extend the income-splitting provision recently given to senior to all families.

There isn't one from the Government. dobbin's vagure post left that impression. But you won't see this Government head down that very expensive path.

[White Doors]

Cut Corporate taxes 1% per year for two years.

Cut income taxes at all levels 1% per year for 3 years.

Make final GST cut after the last year of income tax cuts.

[jdobbin]

I'm not aware of any initiative to extend the income-splitting provision recently given to senior to all families.

The Liberals themselves have been flirting with that provision as they look for the best type of tax cuts to propose.

http://www.canada.com/nationalpost/financi...a9d&k=24815

Liberal leader Stephane Dion yesterday softened his party's position on income-splitting, telling reporters he is "not convinced yet" it is a good idea but refusing to discount it.

It was the Liberals under Prime Minister Jean Chretien who closed a series of loopholes and made it difficult for individuals to allocate a portion of their income to another family member for tax purposes. The Liberals also opposed the Conservative government's "tax fairness plan" introduced in 2006, which permitted income-splitting for pensioners. But Mr. Dion appears to be warming to the idea, thanks in part to the lobbying efforts of Garth Turner, the former Conservative who joined the Liberals last year.

"Mr. Turner has a lot of ideas and many of them are very good," Mr. Dion told reporters yesterday during a press conference in Toronto.

The Tories when they introduced the income splitting idea for seniors also indicated they might consider extending it to others.

[jdobbin]

Cut Corporate taxes 1% per year for two years.

Cut income taxes at all levels 1% per year for 3 years.

Make final GST cut after the last year of income tax cuts.

I think there might be some merit in the income tax cuts you propose. I'd leave the GST cut alone.

[Pat Coghlan]

There isn't one from the Government. dobbin's vagure post left that impression. But you won't see this Government head down that very expensive path.

Time will tell, but they've opened the door for retirees, so the next logical step is to do the same for all families.

[geoffrey]

What is needed is tax reform along the lines of the income-splitting provision now in place for retirees. There should be tax brackets for various family classes (singles, couples, couples with children etc.). After all, the government looks at your FAMILY income when determining your eligibility for benefits, and IMHO ability to pay taxes and eligibility for benefits are two sides of the same coin.

This is absolutely absurd. Deal with tax on an individual basis, not this family nonsense. Why should I be subsdizing families?

A two income family (one that would use this break) has many times the disposable income as I do. Why give them a break, and not me?

A flat tax, on an individual basis, across the board, is the most fair way to tax. Every dollar earned is responsible for an equal amount of taxation. Cutting taxes just for families might appeal to the swing vote the CPC needs to get elected, but it's absolutely ridiculous and is perhaps the most regressive move one could make.

[Pat Coghlan]

This is absolutely absurd. Deal with tax on an individual basis, not this family nonsense. Why should I be subsdizing families?

A two income family (one that would use this break) has many times the disposable income as I do. Why give them a break, and not me?

A flat tax, on an individual basis, across the board, is the most fair way to tax. Every dollar earned is responsible for an equal amount of taxation. Cutting taxes just for families might appeal to the swing vote the CPC needs to get elected, but it's absolutely ridiculous and is perhaps the most regressive move one could make.

How absurd can it be, given that this is how the tax system works in the US. There, every family with the same income pays the same taxes. How absurd is that???

The tax break is not currently given to all DIFs (dual-income families). Those which have one spouse earning most or all of the income are, in fact, treated pretty much like a single person. THAT is absurd.

One thing that you and I agree on, is the second income, especially when taxed in the lower tax brackets, represents a HUGE increase in disposable income for many families. This is what has pushed the price of houses up to the $300K-$400K range, and beyond.

Question for you: If you are in favour of taxing ONLY individuals based on their income, then, if my wife stays at home and has zero income, should the government treat her like an individual with zero income, and allow her to apply for 50% of all available benefits on her own? For example, each child is eligible for a maximum of $1,500 per year in CTB payments, which starts to get clawed back after $40K of income. We have 5 kids. Should she be allowed to received half the total ($3,750), while most of my share is clawed back?

Or, are you in favour of looking at family income when it benefits the government (use it to claw back family benefits) but not when it might benefit the individual (allowing a spouse to disassociate his/herself from the other spouse's income).

[White Doors]

I think there might be some merit in the income tax cuts you propose. I'd leave the GST cut alone.

GSt cut is still a good one. Makes a big difference when buying a new car or new home.

Income taxes have to come first though too. They also need to raise the min when you start paying to like $15k I think.

[White Doors]

This is absolutely absurd. Deal with tax on an individual basis, not this family nonsense. Why should I be subsdizing families?

A two income family (one that would use this break) has many times the disposable income as I do. Why give them a break, and not me?

A flat tax, on an individual basis, across the board, is the most fair way to tax. Every dollar earned is responsible for an equal amount of taxation. Cutting taxes just for families might appeal to the swing vote the CPC needs to get elected, but it's absolutely ridiculous and is perhaps the most regressive move one could make.

Not when you take onto consideration that families that have children are worth more to society than young single males like yourself. The tax system should reflect this reality. Grooming the next generation of tax payers is not an easy accomplishment. The tax system needs to reflect this.

[jdobbin]

GSt cut is still a good one. Makes a big difference when buying a new car or new home.

Income taxes have to come first though too. They also need to raise the min when you start paying to like $15k I think.

I don't buy a car or house every year. I do earn income every year. That's why I prefer an income tax cut over almost any other tax cut.

[M.Dancer]

I don't buy a car or house every year. I do earn income every year. That's why I prefer an income tax cut over almost any other tax cut.

What's more, how often do you hear that cash will get you a discount? I will always pay cash when I can. Unless I'm shopping at a big box, I ask what the cash discount will be, usually 5-10%.

[August1991]

If I had my choice of how we were taxed, I would raise the GST to 13-14% and drop income tax completely for all people. I would keep a business income tax but at a much lower level etc. That way we would have it much harder for people to cheat and those who do manage to cheat will still have to pay for all the taxes that have been added up to their level of purchase. The underground economy would not make sense any more and so we would have more people paying fair shares.

I agree but I would do away with corporate taxes and add congestion and environmental fees.

Long ago in another thread, I suggested my ideal tax system. I'm convinced that in about 50-75 years, it is the tax system that will be used in most developed countries.

There will be consumption taxes (such as VAT or GST), road user fees, land taxes, atmospheric use and emission taxes and even noise pollution taxes or fees.

One of the advantages of GST over income tax is that government tax collectors have fewer people to deal with in its collection. The government collects GST from several hundred thousand businesses whereas it must deal with several million people to collect income taxes. (Incidentally, the Quebec government collects all GST paid in Quebec and returns the funds to the federal government.)

I'd also abolish all payroll taxes such as CPP/QPP and EI contributions. These are pernicious taxes that hurt the poor harder than the rich, kill jobs and make life difficult for all businesses by needlessly adding paperwork.

Milton Friedman, the inventor of payroll deduction, regretted to his dying day that he thought of the scheme.

----

Returning to the OP, I think Dion is on to something with this idea of cutting taxes. Dion is also right to pursue his troika of basic principles: protection of the environment, a fair distribution of income and wealth creation. Harper, the so-called new guy with new ideas, can only claim to have added complexity to our tax forms by offering transit-pass deductibility. Brilliant.

Question for you: If you are in favour of taxing ONLY individuals based on their income, then, if my wife stays at home and has zero income, should the government treat her like an individual with zero income, and allow her to apply for 50% of all available benefits on her own? For example, each child is eligible for a maximum of $1,500 per year in CTB payments, which starts to get clawed back after $40K of income. We have 5 kids. Should she be allowed to received half the total ($3,750), while most of my share is clawed back?

Or, are you in favour of looking at family income when it benefits the government (use it to claw back family benefits) but not when it might benefit the individual (allowing a spouse to disassociate his/herself from the other spouse's income).

That's a good question.

At present in Canada, we have the CTB (which pays around $120/month/kid) and starts to be clawed back at family income around $40,000 and then we have the NCB that pays about $160/month/kid that is all clawed back by family income of around $20,000. Lastly, there's the Tories' UCC which gives a taxable $100/month/kid to the parent with the lowest income. (I hope that I have this right.)

First of all, all these schemes make a mess of the tax system. Depending on family structure, different people face wildly different marginal tax rates.

Pat C, you make the legitimate point that for two of our three federal child support schemes, the feds treat the family as the taxable unit, not the individual. (Incidentally, Quebecers don't get the first two child subsidy schemes since we have a day care system.)

One consequence is that often, it makes more sense for a couple to remain separate and file separately.

My feeling about household income taxes (or income splitting if you prefer) is that we already subsidize a stay-at-home spouse because her work/efforts are now tax-exempt. We would be compounding this error if we allowed two individuals to split one person's labour market income.

Here's a suggestion: provide the same personal exemption for each person in the household - say, $10,000/adult and $5,000/kid. Then, file a single income tax statement for the household and deduct the exemptions. We could even throw in a, say, $2000 marriage exemption. The household (and each member) would then have a single marginal tax rate.

Does that make any sense?

Edited September 13, 2007 by August1991